f8k_charlestonex10iii.htm


    Exhibit 10.3

    ASSUMPTION
AGREEMENT

    
       

       

       

      
        
          
            	
                    DATE:

                  	
                    December
      23, 2009

                  
	 
      	 
      
	
                    BETWEEN:

                  	
                    Paneltech
      International, LLC (together, “Borrower”)

                  
	 
      	
                    2999
      John Stevens Way

                  
	 
      	
                    Hoquiam,
      WA 98550

                  
	 
      	 
      
	
                    AND:

                  	
                    Paneltech
      Products, Inc. (“Transferee”)

                  
	 
      	
                    2999
      John Stevens Way

                  
	 
      	
                    Hoquiam,
      WA 98550

                  
	 
      	 
      
	
                    AND:

                  	
                    ShoreBank
      Pacific (“Bank”)

                  
	 
      	
                    PO
      Box 400

                  
	 
      	
                    Ilwaco,
      WA 98624

                  
	 
      	 
      
	
                    LOAN
      NO.

                  	
                    100012003

                  


          



         

      

      RECITALS

       

      A.           Bank
is the holder of that certain Promissory Note dated January 19, 2001 (the
“Note”) in the original principal sum of $500,000, as amended and increased by
Change in Terms and currently in the amount of $1,500,000, made by Borrower in
favor of Bank.

       

      B.           Borrower
executed a Security Agreement dated January 19, 2001 (the “Security Agreement”),
by which Borrower granted to Bank a security interest in the personal property
of Borrower.

       

      C.           Borrower
also executed a Business Loan Agreement dated January 19, 2001, which has been
replaced by a Business Loan Agreement dated November 30, 2009 (the “Business
Loan Agreement”), reciting the terms and conditions under which certain loan or
loans were extended to Borrower by Bank as well as other Related Documents as
defined in the Business Loan Agreement.

       

      D.           Leroy
D. Nott, Scott D. Olmstead, Ronald H. Iff, Sorb Management Corporation, and L.D.
Nott Company (Collectively as “Guarantors”) have provided or will provide
Guaranties in favor of Bank, the form of which will be satisfactory to bank in
its sole discretion.

       

      E.           The
Security Agreement, the Business Loan Agreement, the Promisory Note, Guaranties
and the Related Documents, and any amendments thereto, together with this
Agreement, are collectively referred to as the “Loan Agreements”.

       

      F.           Transferee
and Borrower have entered into that certain Agreement and Plan of Merger by and
among Charleston Basics, Inc., Paneltech Products, Inc., and Paneltech
International, L.L.C. dated December 23, 2009 (the “Merger Agreement”) and
Borrower and Transferee have requested that Transferee be permitted to assume
the obligations under the Note and the Loan Agreements. Bank has agreed to
permit such an assumption in accordance with the terms of this
Agreement.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      G.           Borrower
and Guarantors hereby agree to remain liable for the obligations of the
Transferee and further agree that the personal property defined in the Security
Agreement will further secure the obligations of Borrower and Transferee under
this Agreement.

       

      WHEREFORE,
in consideration of the covenants contained herein and other valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Borrower, Transferee, and Bank agree as follows:

       

      AGREEMENT

       

      1.           Assumption. Transferee does
hereby assume and agree to punctually pay and perform all covenants and
obligations of the Note and the Loan Documents as though the Note and the Loan
Documents had originally been made, executed, and delivered by
Transferee.

       

      2.           Consent; Borrower’s Continued
Liability. Bank and Borrower consent to Transferee’s assumption of the
Note and the Loan Documents pursuant to the Merger Agreement and merger related
documents subject to confirmation by Transferee and Borrower of the following
clarifications, which if withheld would be considered an event of default: a)
the Bank has a valid lien on all assets of the Borrower and is senior to other
lien claimants except for as provided in the security agreement and the
lntercreditor Agreement with Anchor Bank; b) the bank has not received Audited
financial statements, c) the bank’s lien is not limited to ‘purchase money
security interest; d) the bank’s indebtedness is senior in security and right of
payment to any payments relating to equity or Preferred securities; e) the bank
does not waive or forbear upon any rights or remedies under the loan documents
in agreeing to this assumption; f) the Transferee also agrees to sign a security
agreement, in form satisfactory to Bank, where they grant interest in all
existing collateral and collateral subsequently acquired, and to assist with all
UCC filings required by Bank, and Transferree and Borrower hereby grant Bank
full power of attorney to execute any such document. All parties further agree
(a) that Transferee’s assumption shall not relieve Borrower from liability under
the Note and the Loan Documents, (b) that Borrower is jointly and severally
liable with Transferee under the Note and the Loan Documents until all
obligations arising thereunder have been fully performed, and (c) that
Borrower’s liability is primary with and not secondary to the liability of
Transferee. Borrower further agrees that the company assets shall continue to
secure Borrower’s obligations under the Agreement. Borrower further agrees to
execute documents as necessary to perfect Bank’s security interest.

       

      3.           Representations and
Warranties. Borrower and Transferee represent and warrant (a) that the
Note and Loan Documents are legal, binding, valid and enforceable obligations of
Borrower and Transferee and are in full force and effect, and (b) that there are
no existing claims, defenses, personal or otherwise, or rights of setoff
whatsoever available to Borrower or Transferee with respect to the Note and Loan
Documents. Borrower and Transferee agree to execute, at Bank’s request, any
documents reasonably required by Bank to evidence and carry out this
Agreement.

       

      4.           Notice. Transferee is entitled
to the same notice as Borrower. Notice to Transferee shall be directed to
Transferee’s address stated above. Notice to Borrower shall be directed to the
address stated above. A party may change the address to which notice is directed
in the manner provided in the Note and the Loan Agreements.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      5.           Binding Effect of Agreement.
This Agreement is binding on the heirs, executors, administrators, successors,
and assigns of the parties.

       

      6.           Incorporation of Recitals. The
Recitals are incorporated herein as part of this Agreement.

       

      7.           Entire Agreement. The parties
declare and represent that no promise, inducement, or agreement not expressed in
the Loan Documents has been made between them, and that the Loan Documents
contain the entire agreement between them. The Loan Documents cannot be modified
except by a writing signed by all the parties.

       

      8.           Effective Date. This Agreement
shall be deemed to have taken effect on the date first written
above.

       

      IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed.

       

      ACKNOWLEDGED
AND AGREED TO:

       

      
        	 
      	 
      	 	 
      
	 
      	 
      	 	 
      
	
                BANK:

              	
                
                  /s/
      Randell Leach

                

              	 	 
      
	 
      	
                Shorebank
      Pacific

              	 	 
      
	 
      	 
      	 	 
      
	
                BORROWER:

              	
                
                  /s/
      Leroy D. Nott

                

              	 	 
      
	 
      	
                Paneltech
      International, L.L.C.

              	 	 
      
	 
      	 
      	 	 
      
	
                TRANSFEREE:

              	
                
                  /s/
      Leroy D. Nott

                

              	 	 
      
	 
      	
                Paneltech
      Products, Inc.

              	 	 
      
	 
      	 
      	 	 
      
	
                GUARANTORS:

              	
                
                  /s/
      Leroy D. Nott

                

              	 	
                
                  /s/
      Scott D. Olmstead

                

              
	 
      	
                Leroy
      D. Nott

              	 	
                Scott
      D. Olmstead

              
	 
      	 
      	 	 
      
	 
      	
                
                  /s/
      Ronald H. Iff

                

              	 	
                
                  /s/
      Scott D. Olmstead

                

              
	 
      	
                Ronald
      H. Iff

              	 	
                Sorb
      Management Corporation

              
	 
      	 
      	 	 
      
	 
      	
                
                  /s/
      Leroy D. Nott

                

              	 	 
      
	 
      	
                L.D.
      Nott Company

              	 	 
      


      

      


      
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